Is CBN’s foreign exchange policy business friendly?

The Central Bank of Nigeria’s foreign exchange policy is not business friendly. It requires immediate change and resolution. Look at the parallel market and the official market, there is serious gap. This can only create millionaires out of a few favoured individuals. A situation where you can use connection to get foreign exchange at the official rate and take it to the black market to sell at a higher rate will not increase production and will also not be in the overall interest of the economy. That is what is killing Nigeria. I do not think the large gap is the best. The impact is escalating the cost of production of goods because the exchange rate continues to rise. That will affect the cost of production.

Given the inflationary trend and other vagaries, once the cost of production is high, the selling price of the manufactured goods will be high and the consumers will be the ones to suffer more; for those consumers who can still afford to buy the goods.

For the producers, there will also be serious reduction in profit margin. From the customers’ angle, they will reduce their patronage and when they reduce their patronage for the goods, it will adversely affect profitability of the business. Profit will obviously reduce and it may even lead to a situation where the manufacturer or the service provider will be forced out of business.

The business owner will be forced to consider cutting costs and one of such costs will be salaries. This means there will be either right-sizing or down-sizing which will lead to job losses. The consequence is that it will worsen the unemployment problem in the country.

In effect, people will suffer, unemployment will escalate and families and dependents of those retrenched will suffer more. This will lead to greater hardship in the country.

The way out is for the Federal Government to urge the CBN to really effect necessary adjustment as quickly as possible. They should reduce the gap between the official and black/parallel market rates. •Chief Isaac Adeyemi (President, Association of Hotel Owners, Kwara State chapter)

Without much ado, the central bank’s foreign exchange policy is not business friendly. It is making it difficult for businesses to plan because you wouldn’t know what next the CBN will do.

Anytime we do this kind of fixed exchange policy, businesses are in a fix, except anyone who has a limitless amount of supply.

If we have limitless amount of supply then we can be like China where they have very huge amount of foreign reserves and people know that the exchange rate will be within the range that it needs to be.

Because of the supply challenges we have, fixing the price is difficult because what it means is that if tomorrow there is no dollar again, then you can change the price.

But if the CBN allows the market to stick to price, it would be expensive to start with, but as time goes on, it would go down.

Luckily for us, we have an experience as it happened in the telecoms industry where SIM cards were sold for as high as N20,000, but today these same SIM cards are being given out free of charge with even free credit.

We have so many exchange rates and this has led to the CBN rationing the amount of dollar that it has. The challenge is that out of the rationing of dollar that we have, people are still speculating on it and they are speculating because they know there is no way the CBN can keep the price as low as it is because the CBN does not have enough supply of dollars.

But if the market is determining it, it can go to N1,000 for a start and if that happens, people that don’t need it who are using it for speculation will leave the market and this will reduce the demand thereby making original people alone to start using it and the price will come down again. •Mr. Femi Ademola (Executive Director, Corporate Finance, BGL Capital Limited)

The foreign exchange policy of the CBN is not good for businesses across the country. The problem we have is that you don’t even know the actual rate which the dollar is being exchanged for our naira as it fluctuates virtually every day. There are too many foreign exchange rates in one country. Many people have different rates which they believe is the exchange rate for Nigeria. Another problem is that we don’t even know the amount of money that is accruing to Nigeria, because every time the government comes out to say there is no money, its agencies will as well say there is no money and you really cannot tell if they are telling the truth or not. This alone is a big problem.

Now, on the foreign exchange matter, the way the CBN is handling it is poor. They say the current official exchange rate is N305 to a dollar, but the question is: is the forex available? How many businesses access foreign exchange at that rate? People complain of foreign exchange scarcity up till today despite all the policies of the CBN to ensure its availability. This is a problem and it shows that the foreign exchange policy of the bank is not working. The policies are confusing; there are a lot of ups and downs with the policies and I must say that the policies are not friendly to businesses across the country. •Dr Sam Nzekwe (A former President, Association of National Accountants of Nigeria)

To the manufacturers, the CBN’s foreign exchange policy is not business friendly because it does not give the manufacturers the opportunity to get raw materials to produce their goods without difficulties.

We agree that some of these policies are strident, but they are aimed at putting a check to the abuse of relaxed foreign exchange policies in the past. However, it is not right to put in place a policy that will adversely affect Nigerians.

The CBN knows that some businessmen operating in the free zone without paying tax sell their goods within the country instead of exporting them. Some people divert foreign exchange instead of using it for its original purpose. This in turn affects the country in terms of foreign exchange earnings. This may have informed CBN’s decision to change it (foreign exchange policy). But we also have genuine businessmen. However, it is not right to put in place a policy that will adversely affect Nigerians. •Mr. Charles Beke (Chairman, Manufacturers Association of Nigeria, Rivers/Bayelsa chapter)

The Central Bank of Nigeria’s policy on foreign exchange is a good one. It is a business friendly policy and I want Nigerians to look at it very well. It will help businesses to grow.

There is the belief that the CBN’s foreign exchange policy will create a favourable climate for investments, trust and understanding within the foreign exchange market.

This foreign exchange policy will eventually bring many businesses back to life and it will bring down inflation. This foreign exchange policy will also restore the confidence of investors because there will be no more preferential treatment. It will ensure a level playing field for small and big businesses operating in the country.•Mr. Ibitoye Kilomodemo (National Executive Member, Nigerian Society of Engineers)

Copyright PUNCH. All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.